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Any goods sold or brought in India has a tax levied on it which is referred as Sales Tax. It falls under indirect tax category as the taxpayer does not pay the tax directly to the government but pay it to the collector who later submits it to the government. This tax is usually charged at the time of purchase or exchanging the goods at a certain percentage of the goods value. It is levied by the union government and state government according to Sales tax rules.
The benefits can be listed as below:
Sales tax are of different types depending on the goods and service types:
However, sales tax is divided into two major types of rules:
The central government maintains the taxation laws in this country and the rules are followed as mentioned under Central Sales Tax Act, 1956. This act prescribes tax collection from various goods and it is payable in the state where those goods are being sold.
Objectives of CST:
The amount payable for acquiring a product is called as sale price which includes packing cost, insurance charges, incentives and sales tax paid by the dealer etc. no discount or installation cost or delivery cost can be included in it.
Any goods that are transferred or moved between two states for sale is referred as inter-state sale after the sale completes in the destination state.
Dealers need to give a declaration to the buyers in prescribed forms.
There are various forms issued by Sales Tax authority which is defined to use for specific purposes:
State governments can also levy a taxes on certain goods to maintain their financial requirements. The tax rate may differ from goods to goods and in various states with VAT included into it which is a great revenue generator for the states. This is why certain goods have a different price in different states.
Certain exemptions are prescribed into certain goods by various states to avoid double taxation:
Calculating sales tax is complicated, all one need to know is the right formula.
Total Sales Tax = Cost of item x Sales tax rate
The essential point needs to remember while calculating sales tax is:
There are many forms of tax violation and such acts can lead to a penalty for the taxpayer:
The CBDT or Central Board of Direct Taxes controls the administration of taxes in India and has been declared as a statutory authority and functions under Central Board Revenue Act, 1963 and it works under the Department of Revenue.
The member structure of CBDT:
It maintains all direct tax collection and related issues in India including the following: